Good idea to use my dc inheritance to buy dm’s house?

[Billi80]

My dc is only 9 and is about to inherit money. Would it be possible to use this to buy my dm (her dgm) house via a trust fund? My dm (her dgm) is very short on money and would give her a bit of respite in her later years. As my DD wouldn’t have access to the money till she is 18 it seems a better investment than ISAs, etc. Or is this idea bonkers?

Found this online:

there are some legal and financial considerations to keep in mind if you plan on buying a house jointly with your children. Here are the key points:1. Ownership and Legal Representation: Since your children are underage, they cannot legally own property or enter into contracts. You would need to hold the house in trust for them until they turn 18. This involves appointing trustees to manage the property in their best interests. It's important to consult a solicitor specializing in trusts to ensure everything is set up correctly.2. Inheritance Tax Implications: If the house is solely in your name, it may be subject to inheritance tax when you pass away, as it wouldn't be considered part of your children's inheritance. However, currently there are no inheritance tax implications if you simply use the money to buy a house

Just make sure you are doing this for your daughters future with sound advise and not because you have an emotional attachment to the property

I’m not a financial expert, but this sounds an excellent idea to me. So, I’d seek legal advice on how the trust would work.

Your mum could also pay a little rent (whatever she could afford) into an account for your daughter and that may give a similar return on the investment than a high interest savings account. Plus, the capital value will likely grow too as you say.

Your daughter then has her own home in London at 18. Wow! What a start in life! And could presumably live there with your mum, if by then your mum was still able to live independently with a bit of care.

Who currently owns the house? If it’s a council house, the rules on Right to Buy will soon be changing: https://www.gov.uk/government/consultations/reforming-the-right-to-buy.

It depends. What is your investment plan to maintain the property. If you mother or you, not your kid, can afford to maintain it, then it could be a good idea. Aim for 1 percent of the value annually .

if you have no plans to maintain it, then no I would not.

the responses are based on the fact people tend to find it distasteful to eye up your kids Inheritance to spend as you wish. In this instance, it feels you want to spend it to benefit your mother, as your primary concern.

Two points to consider.
To be sure you could upkeep the house to retain its value you would need to have a similar value in reserve to draw upon. Be realistic as to what you could afford over the period of time. Thanks to covid I was stuck with two houses. One was empty but I still had to cover repairs, council tax, utilities and visit daily to retain building insurance.

Get independent financial advice regarding investments as well as seeking legal advice IF you decide to retain the house as part of a family trust.

If she pays only ‘a little rent’ that’s a breach of the OP’s fiduciary duty and she will need to make the amount up to a full market rent or risk being sued / prosecuted for not doing so.

Trust monies cannot be used to benefit anyone other than the beneficiary.

Absolutely not gambling.

if you are a trustee it is your duty to invest the money on behalf of the beneficiaries. If the property is a good investment and is likely to give better returns than another investment then it’s a good idea. The only snag I can see is that your DM should then be paying rent to the trust. This would be the case if you decided to invest in a property that is not currently owned by your DM and had tenants.

At the age of 18 your daughter can then become an active part of managing the trust. She would have to evict your DM is she wanted to cash in her investment.

Legal and financial advice would be best here.

If it’s held in trust for the child and rented to the DM then it’s on the “landlord” I.e the trust/op to sort the maintenance.

there would be no reason for it to fall into disrepair, and it would have to be some pretty serious long term neglect for it to be so bad it needs knocking down.

legal advice o/p. It sound like a good idea to me if it’s a good area, a decent investment and DM will pay rent. Although you’d need to do the sums for your DM, would the sale price last her long if she’s paying rent etc?

Actually, my responses are based on the fact that what the OP is suggesting is almost definitely illegal (misappropriation of trust monies by a trustee) and is likely to at the very least get her sued and at the worst get her a criminal record.

As far as I’m aware, you’re only expected to sell your own home to pay for care. Your landlord can’t be forced to sell their home to pay for care. The DD’s trust would be the DM’s landlord.

If you legally invest your daughter's inheritance in buying a property ( it's irrelevant that the property will be occupied by a relative), you need a full legal contract to include many thing including upkeep responsibilities amd rental agreement
Or are you meaning just give your dm your dd money ? If so that's theft
You will need to invest the rent the tenant pays for your daughter and pay tax
And what about if your dm dies before dd is 18
Will the house me mortgaged and empty ?
It's a legal minefield
As others have said a 9 year old cannot buy a house so you would be buying it and using money that isn't yours from someone who is not legally able to provide consent
Personally this wouldn't sit right with me
It's not the right thing to do
Id invest in some financial advise for your dd and put the money away until she s 18
It's it's not yours to spend

Yes, I can read thanks 😅 And in context I think the OP is saying if it’s in trust the DD wouldn’t have access until she’s 18.

Like I say even if the inheritance is held in bare trust (investments, JISA, etc), DD can’t access anything until she’s 18 anyway. So yeah all speculation and don’t think the OP really understands the ins and outs of trusts and bare trusts. Which is understandable because they can be tricky!

That doesn’t matter, you could establish a trust I expect. But it is wrong to use your dds money to benefit your mum, you would be in breach of your fiduciary duty to your dd. I expect there are better investments, and it’s your duty to make them.

This could be a minefield in which your daughter’s interests end up opposed to your mother’s. There is so much that could go wrong. The money belongs to DD not you or your mum and needs keeping separate and investing carefully.

and if Mum defaults for any reason on the loan what then? If Mum can't/doesn't keep the house in a good state of repair what then?

I wouldn't tell your child about the house until you know how mature they are at 18 either (I know if I had my own house at 18 I would have gone WILD).

It would be her house. You can't not tell her because you don't deem her mature enough!

Look up deliberate deprivation.

I don't know whether it is a good idea or not or the legalities. But generally property is an excellent investment especially one as here in outer London. House prices may dip abs fall but over time they go up. And there is no reason why the house should fall in disrepair, OP will in effect be the landlord and responsible for keeping it in good repair why should he not maintain it.
I think it could work but all eventualities would need to be thought through carefully and agreed between you all and you definitely need legal advice

How can it be seen as deprivation of assets when she's selling it and will have the cash

"paying a little rent" is an immediate red flag. In order for the OP to properly discharge her responsinilities as her daughter's trustee, the grandmother would have to be paying market rent and be living in the house in a "market" situation. The "presumably could live there with your mum" is condemning the daughter to a life she didn't plan and might not choose. Once daughter is 18 she might want the money so what then? evict her grandmother?

Look up deliberate deprivation.

I don't see how that would be relevant here? I mean, I agree with posters that there are a lot of issues. But not deliberate deprivation of the grandmother's assets in terms of looking at care home fees. Why is the grandma losing assets in this situation?

Even if this is the grandma's house that OP is considering buying, as long as they pay market rate, that would be fine. Selling your house for market value isn't deliberate deprivation, because you're getting the value of the asset.

she will have the cash NOW and will have to pay market rent etcetera out of it. If she needs the cash now,nwhich seems to be implied, then she won'tbe able to leave it untouched to pay for care.

Presumably with the money she receives from the purchase your mother will be able to pay a full London rent, which can be used to maintain the house, which will likely cost several thousand a year. New renting restrictions may mean the house will need thousands spent on it to bring it up to the legal standard (fire alarms, electrical tests, insulation) before you can legally rent it to her. If she needs to go into a care home in the next few years, and she has £££££s invested, that could all go on care home fees — so any thoughts you had of her being able to leave her money to your DC might be out the window.

Pretty sure that if you do buy it from her, you have to pay a realistic amount. She can't legally sell it to you for 50% of what it's actually worth. That would be seen as a tax evasion manoeuvre by HMRC.

A lot of people on here think the streets of the property investment game are paved with gold - they’re not. Might have been 25 years ago, not now.

High legal fees and stamp duty when you buy, CGT and more fees when you sell. Tax on any profit from renting.

Even if the property increases in value the tax man will grab some of that money if you sell so it’s not all yours.

If the mother does not pay market rent and the OP cannot show the transaction was done on an arms length basis the house can still count as part of the mother’s estate for IHT. I don’t know if this applies to care home fees.

Property is also very illiquid, if the DD needs cash she has to sell the house, what happens to granny then?

In terms of deliberate deprivation, selling your house to a family member then using up the sale proceeds to pay the same family member a market rent (which in a few years would have the same effect as giving the house to said family member for free) seems to me to be the sort of loophole most councils would have addressed.

Maybe not but if this was possible, I’d have expected to see it recommended as a financial plan for the elderly and I haven’t.

I agree but I'd be looking more widely than the grandmother's house. It's unlikely to fall in value even if the increases in value are less than they've been in recent decades.

Surely your dd comes before your mother OP. Your mother is an adult and can look after herself/plan for her future. Your dd relies on you to do it for you.